Lease purchase with balloon (in Ireland)

paul7g

Hi,

One of my colleagues is looking to buy his first €50k+ car.

He has been advised to look at a ‘Lease Purchase With Balloon’. He has asked for my advice on it, but I honestly don’t know enough about this finance option. I did consider it myself before, but there didn’t seem to be any companies in Ireland providing this option, so I didn’t look into it any further. A lot of the UK car Vloggers tend to go with this option.

My advice / opinion has always been that financing a car is fine IF you have taken care of the other basics in life (house, savings for rainy day, etc).

Can anyone provide any advice on:

01 - how this financing works

02 - benefits vs other traditional financing (i.e - traditional car loan from bank)

03 - cons / disadvantages with it


Thanks for your help.

bazz26

You are either talking about PCP or the closest thing to what your talking about here is PCP.

There is already a mega PCP discussion thread here about the ins and outs of it:
https://www.boards.ie/vbulletin/showthread.php?t=2057120240

paul7g

Thanks, I was told they are different things... PCP vs Lease Purchase w/ Balloon

bazz26

I don't think there is any personal leasing in Ireland, PCP would be the closest.

paul7g

Thanks Bazz, I thought so.

That aside, do you know what the difference is?

Maybe there is a difference around the Balloon?

bazz26

No idea to honest.

R.O.R

I haven’t a clue what a lease purchase with a balloon is, and I've been working in Leasing for the past 16 years...

bazz26

According to this it seems to be a PCP type arrangement for business users:

https://www.santanderconsumer.co.uk/finance-that-fits/car-finance/business-customers/lease-purchase-with-a-balloon/

paul7g

I don’t think it is for a business.

A lot of the YouTube Vloggers use it, going through this guy - http://dg18son.com/types-of-finance-explained/

I think you are just paying / financing the depreciation on a car.

Lantus

Pcp is not available for business or fleet due to the massive mileage. I'd say this is a business variant of pcp where there is no option to hand the car back. You either buy or renew.

jimmycrackcorm

It's a business lease. You have the option to purchase after the typically three year lease. There is a deposit but it's likely only a month up front.

paul7g

It’s not a business lease.

As I have mentioned it is becoming very popular in the UK.

With PCP, you have the option to return the car... with this you don’t either.

grogi

R.O.R wrote: »

I haven’t a clue what a lease purchase with a balloon is, and I've been working in Leasing for the past 16 years...

It's a leasing agreement when the lease rate is higher than actual running cost and the leasee has an option to purchase the goods ay better than market value price when the agreement terminates.

Such agreement bears much smaller risk for the leasing company, so they can offer very competitive rates, as the lessee is unlikely to leave the agreement in the middle.

sunnysoutheast

With Lease Purchase you are committed to paying the balloon payment at the end. You cannot just walk away subject to mileage limits as you can with a PCP.

Payments are usually structured as something like a deposit of 3 monthly payments + 35 monthlies + balloon.

Obviously the balloon is based on the estimated residual value.

I bought a couple of cars this way years ago as I was doing big mileage on expenses. I had a Golf which I traded in part-way through the agreement. The dealer settled the outstanding finance.

In UK BTW. I don't think it's available in Ireland.